Importance of Accounting to Business
Many of us might be wondering, why we need accounting for our business? For experts, accounting is very vital in a business in order for it to grow and flourish. Accounting is considered to be as the backbone of every business in the world. After all, accounting was created as a response for the development of trade and commerce during the medieval times. Italy was the first to use the source of accounting services and bookkeeping entries, and it was first published around 1400s. accounting has been used to organize and record all the financial transactions in all kinds of businesses. The oldest concepts of bookkeeping services such as assets, liabilities and income are still used to reconcile records and a ground for basis even until today. The process of recording these transactions are generated through the use of the compiled information. Well, thanks to modern technology, they have created computer and accounting software. Most of the bookkeeping transactions are now made and stored in computers or on the cloud for faster transactions. Accounting still gives us a financial perception where we need to make solid decisions for our business and its current status.
Two basic categories of accounting:
Financial accounting- is composed of several information that most companies make available for the public such as stockholders, customers, creditors, suppliers and other regulatory commissions.
Managerial accounting- often deals with information which is not exposed to the public. These information are as follows: salary costs, costs of goods being produced, profit targets and material control information. This term is often used by the department heads, division managers, and supervisors in order to make better decisions about their daily operations of the business.
We all know that businesses must be held accountable for all the methods that they use in order to run their business, including potential for theft, greed and dishonesty in the organization. If you are not aware of these issues that may be present in your company, then you can read the latest issues about corporate abuse in newspapers. There are several important and specialized fields in accounting and when enforced properly, you will be able to eliminate the possibility for fraud. If accounting are handled with care and respect, then all methods and processes in your business will be perform as expected. However, when abuse occurs, the system will be poisoned with dishonesty and greed leading to poor performance of the company.